T.C. Memo. 2010-108
UNITED STATES TAX COURT
JOSE J. & MARY D. RAMIREZ, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24262-08. Filed May 17, 2010.
Jose J. & Mary D. Ramirez, pro sese.
Aely K. Ullrich, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: Respondent determined a deficiency of $9,995
in petitioners’ Federal income tax for 2007 and an accuracy-
related penalty of $1,999 under section 6662. The issues for
decision are whether petitioners are entitled to claimed capital
loss deductions and deductions on Schedule A, Itemized
Deductions, and whether they are liable for the penalty. All
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section references are to the Internal Revenue Code in effect for
the year in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in California at the time that they filed
their petition.
During 2007, petitioner Jose J. Ramirez was employed as a
lineman for Southern California Edison Co., and petitioner Mary
D. Ramirez was employed as a care provider. They received
combined wage income of $147,159 during 2007.
On their Federal income tax return for 2007, petitioners
claimed a long-term capital loss carryover of $8,000 and a short-
term capital loss of $393; $3,000 was deducted on their return.
They claimed Schedule A deductions totaling $53,649. Respondent
disallowed for lack of substantiation $14,463 in employee
expenses, $2,615 in charitable contributions, and $33,977 in
medical expenses. Petitioners failed to maintain or produce
records to substantiate the deductions.
OPINION
This case was set for trial with 5 months’ notice. Along
with the notice setting case for trial was the Court’s standing
pretrial order, which, among other things, required the parties
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to stipulate in accordance with Rule 91 and to exchange documents
that they intended to use at trial at least 14 days before the
first day of the trial session. The only documents petitioners
produced in a timely manner were attached to the stipulation.
Petitioners presented purported receipts for noncash
contributions that did not list or provide detailed information
about the items contributed, medical information related to their
daughter that did not identify actual medical expenses during
2007, a purchase contract for a 2006 Toyota Sequoia, a “mileage
log” that appeared to reflect primarily nondeductible commuting
expenses, and a 2009 bill for cellular telephone service.
At the time of trial, petitioners could not explain the
amounts claimed on the tax return and in dispute in this case.
They presented no testimony about medical expenses or any
business use of the 2006 Toyota or business mileage reflected in
the log. Petitioners claim to have relied on their paid return
preparer, who advised them not to send their substantiating
documents to respondent.
Mr. Ramirez testified that he deducted the base amount of
his monthly cell phone expenses because he was required by his
employer to carry a cell phone. He claimed that cash
contributions were deducted from his paycheck, but he did not
have any records to substantiate that claim. Otherwise he
testified that he gave the information to the return preparer.
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He acknowledged that he may have made a mistake in depending on
someone whom he did not know and following her advice instead of
complying with the Court’s standing pretrial order.
Petitioners are required to keep records and have the burden
of proving that they are entitled to deductions. See, e.g.,
Rockwell v. Commissioner, 512 F.2d 882, 886 (9th Cir. 1975),
affg. T.C. Memo. 1972-133. Although the burden of proof may
sometimes shift to the Commissioner under section 7491(a), it has
not done so here because of the absence of substantiation, the
failure to maintain records or to cooperate with reasonable
requests for information, and the absence of credible testimony
with respect to the specific factual issues in dispute.
Petitioners have not complied with the requirements
applicable to deductions of charitable contributions under
section 170(f)(16) and (17), relating to contributions of
household items and recordkeeping for monetary contributions.
They have not complied with the requirements of section 274(d)
with respect to business use of their passenger automobile or
cellular telephone. See sec. 280F(d)(4). They have totally
failed to prove the amounts claimed and disallowed as capital
losses on their return and on their Schedule A. We cannot
conclude that they are entitled to any of the deductions in
dispute.
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Respondent has the burden of going forward with respect to
the accuracy-related penalty under section 6662(a), applicable
to, among other things, underpayments attributable to negligence
or disregard of rules or regulations. See sec. 7491(c). The
evidence of erroneous deductions in this case satisfies
respondent’s burden. Upon due consideration of the entire
record,
Decision will be entered
for respondent.